State officials signed an agreement with TransCanada to begin work on right-of-way leases along the pipeline route.

While TransCanada isn't saying it will actually build the pipeline, it is willing to convey its right-of-way leases to developers willing to link up with its Canadian pipeline.

"Right now our goal is to keep this project moving. It's been in the works for two decades now," said TransCanada spokeswoman Hejdi Feick. "We are certainly interested in building the Canadian portion of the pipeline."

Under an agreement with the state, TransCanada would file a stranded gas application required before the two sides negotiate fiscal terms of the project.

The company is expected to file that application within a matter of weeks, Feick said.

The state would also resume work on state right-of-way applications filed in 1981 but suspended at the request of the company a few years ago.

TransCanada already holds federal authorizations that include right-of-way permits for the portion of the pipeline route that crosses federal land.

TransCanada has agreed to reimburse up to $1.5 million in administrative costs to the state as well as costs to process the right-of-way agreement.

Once the right-of-way and other financial terms are settled, the company would be willing to convey right-of-way leases to the commercial developer of the project, Murkowski said.

But that group would have to enter into an exclusive interconnection agreement with TransCanada to connect with its pipeline.

TransCanada has 24,200 miles of pipeline and ships the majority of western Canada's natural gas production. The company has held U.S. right-of-way permits for the Alaska project since 1976.

"TransCanada holds federal authorizations including the right-of-way lease to construct the line through Alaska, as well as the right to build the line through Canada. TransCanada is clearly one key part of the equation for the project," Murkowski said.

MidAmerican Energy Holdings Co., a pipeline company owned in part by billionaire Warren Buffett, walked away from negotiations last month after the state refused to grant it a five-year exclusive deal to build the line.

The state is also considering a proposal from the three major oil producers in Alaska - BP Exploration (Alaska), Exxon Mobil and ConocoPhillips - which hold the rights to the natural gas.

The Alaska Gasline Port Authority, which includes the Fairbanks North Star Borough and the city of Valdez, wants to build a municipally owned pipeline.

Earlier this month, Canadian energy transportation company Enbridge Inc., said it was also interested in the project. But the company has not filed applications with the state to begin negotiations.